TL;DR
· JPMorgan's late-June Hong Kong and Singapore roadshow feedback shows that investors' interest in Japanese MLCC and passive component stocks remains high, but valuation judgments have become significantly polarized.
· Bulls still prefer Murata, but many funds are starting to manage risk by longing Murata and shorting Taiyo Yuden or TDK.
· Relying solely on AI server demand to drive stock prices higher in the short term is becoming more challenging, and the next key validation will depend on earnings reports, high-end demand in October-December and 2027 price negotiations.

JPMorgan's electronic components industry Asian roadshow feedback released on June 30 shows that following the significant increase in Japanese MLCC and passive component stocks driven by AI server demand, institutional investors' divergence on the sector's valuation is growing.

From June 22 to 26, JPMorgan visited investors in Hong Kong and Singapore. The focus at most meetings was on passive component manufacturers, particularly companies related to MLCC, including Murata Manufacturing, TDK, Taiyo Yuden, Nichicon, and Nippon Chemi-Con. Investors also paid attention to targets along the AI server chain such as Ibiden, Rohm, MinebeaMitsumi, Alps Alpine, Hirose Electric, among others. The report also mentions a significant increase in inquiries from hedge fund investors regarding potential short targets.

The most significant change in this feedback is that the market is no longer only discussing "how much demand AI servers are bringing," but is starting to ask: is this demand enough to support the already significantly elevated stock prices.

Stock Prices Lead, Valuation Divergence Widens

Since April, the valuation of several Japanese electronic component stocks has been notably higher than historical ranges. The report states that investors are currently mainly divided into two categories: one believes that AI server demand is creating a new growth norm, while the other thinks that the current stock prices are more akin to overpricing.

Passive component companies such as MLCCs, electrolytic capacitors, and crystal devices are the most watched sectors in this trading round. With the increase in AI server power consumption and the complexity of board designs, the demand for high-capacity, high-reliability MLCCs is rising, and the market's growth expectations for related manufacturers are rapidly warming up.

However, the rapid stock price increase has also blurred the consensus. The report points out that some investors believe that after the short-term surge in stock prices, the market is finding it challenging to determine where the true consensus expectations lie. In other words, the strong demand has become the consensus, but to what extent the stock price reflects future growth is now becoming a new point of contention.

Looking at the stock performance, from the end of March to mid-June, Murata rose by about 35%, Taiyo Yuden rose by about 50%, and during the same period, TOPIX rose by about 17%. Passive component stocks significantly outperformed the market and have become a relatively crowded asset group in Japan's AI trading.

Especially Taiyo Yuden, Nichicon, and Nippon Chemi-Con, despite the significant increase in stock prices, the current quarter's profit levels remain relatively low. Therefore, many investors are concerned that if the performance from April to June does not prove simultaneous improvements in orders, prices, and profit margins, there may be downward pressure after the financial reports.

Murata Remains a Core Holding, Taiyo Yuden and TDK as Hedge Tools

Looking at specific positions, Murata is still the target that is most easily held by long positions. This is because its high-end MLCC position is more stable, its customer structure and product specifications better align with the logic of AI server demand upgrades, and it is also more easily seen by long-term funds as a core beneficiary.

However, when stock prices are generally high, investors also begin to use relative trading to control risk. The report shows that some early investors have begun to take profits in Taiyo Yuden and have shifted to paired trades of long Murata and short Taiyo Yuden. There are also investors who continue to hold Murata and wait for a Taiyo Yuden pullback before buying in again.

This indicates that funds have not completely exited the MLCC sector but are starting to shift from "buying the entire sector" to "buying the leader, selling the laggard." Taiyo Yuden is seen as one of the direct beneficiaries of the AI server MLCC demand, with greater price elasticity in the early stage; however, the greater the elasticity, the higher the pressure to realize in the financial reports. Once order growth, price increases, or improved capacity utilization rates do not quickly translate into the income statement, short-term funds are more likely to choose to realize gains.

The position of TDK is more subtle. The report states that some investors believe TDK is a latecomer in AI server MLCC; however, the market also believes that there is a tight supply and demand situation in power inductors related to AI servers, especially thin-film metal inductors, which are expected to drive prices upward. In addition, TDK has room for imagination in increasing market share in lithium iron phosphate backup battery units (LFP BBU) and HDD magnetic heads.

Therefore, TDK could be seen as both a beneficiary of the AI server chain overflow and a hedge tool in paired trades after a valuation surge. The report mentions that many investors take a long position in Murata and a short position in TDK, indicating that the market has begun to reprice among different AI component targets.

Similar differentiation has also emerged in other electronic components stocks. Ibiden is still seen as a beneficiary of AI server motherboard demand, but the stock price has already partially reflected earnings expectations even for FY2030 or beyond; Rohm's visibility has increased, driven by the increase in Kioxia's share value and the 80-100V Si-MOSFET shortage;

MinebeaMitsumi benefits from server fan bearings and BBU protection module demand, but the valuation is no longer cheap; Alps Alpine has become a target for some hedge funds looking for short-selling clues.

Next Steps: Earnings Reports, October-December Demand, and 2027 Price Negotiations

JPMorgan is relatively restrained about short-term stock price performance. The report suggests that stocks related to MLCC have risen significantly since April, but in the past three months, analysts have made limited adjustments to earnings forecasts. Therefore, the possibility of a significant further uptrend in stock prices in the July-September period based solely on AI server MLCC expectations is not high, and related stocks are more likely to enter a range-bound phase.

The real next catalyst may come in October-December.

The report suggests that the demand for high-end MLCCs for AI servers may become clearer in October-December. As 2027 price negotiations progress, if the tight MLCC situation in the supply chain is further exposed, price hike expectations will be easier to materialize, driving stock prices to regain momentum.

In addition to MLCCs, Nichicon and Nippon Chemi-Con are also being reevaluated in the AI server power supply chain. The market's focus is whether the price increases at these companies are merely passing on the rising cost of aluminum or if they can achieve a greater price increase in higher-spec products. With server power architectures evolving to 400V, 800V HV-DC, the demand for long-life, high-reliability aluminum electrolytic capacitors and high-voltage related components may increase.

This is also the most critical area that the current market needs to validate: AI server demand has been extensively discussed, but whether price increases can be implemented, to what extent, and for how long will directly determine whether this trend continues to extend or enters a valuation digestion phase.

Hedge funds beginning to look for short-selling clues does not mean that the Japanese passive component stocks are immediately peaking. More accurately, the market has transitioned from unidirectional trading on AI demand to a more detailed phase of valuation and profit validation. Investors will continue to buy into more certain leaders and will also seek hedging targets with overstretched valuations, insufficient profit realization, or overly strong theme-driven momentum.

For Murata, the key is whether the high-end MLCC demand can continue to support its premium valuation; for Taiyo Yuden, the key is whether the profit statement can keep up with the stock price elasticity; for TDK, the key is whether power inductors, LFP BBU, and HDD magnetic heads can provide new growth support.

This roadshow feedback reflects real-time sentiment from some institutions and hedge funds, not formal profit forecasts, and should not be equated with the full market consensus. However, it clearly reveals a change: AI server demand has already pushed Japanese passive component stocks to high levels. What the market will now look for is not just how strong the demand story is, but whether the financial reports, orders, and price negotiations can support the already elevated stock prices.

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